KIGALI, Rwanda, Aug. 21, 2014 /PRNewswire/ — Rwanda is preparing to issue a $21.8 million (Rwf 15 billion) Treasury Bond to raise funds to invest in infrastructure projects and stimulate the local capital market. The five-year bond will be issued on August 27. The coupon rate is yet to be announced pending results from a market study. Brokerage firms are excitedly warming up with some already courting and negotiating investors behind the scenes.
The bond follows Rwanda's US $400 million debut Eurobond, issued on the Irish Stock Exchange on April 25, 2013, with an initial coupon rate of seven percent. The 10-year sovereign debt earned over US $3.5 billion in subscriptions from 250 investors.
Rwanda is regarded a risk-free economy with minimal inflationary risks and an economic growth rate averaging eight percent over the past decade. Shehzad Noordally, the Chief Executive Officer of CDH Capital Ltd, a local stockbroker, says the local bond will trigger wealth redistribution and address inequality. However, Noordally says the issuance of such a mouthwatering bond is making heads roll in commercial banks. He says the bond "will have huge deposits depleted." The interest on the bond, with a zero risk aversion, is likely to shoot above 13 percent and a five percent withholding.
"We need more bonds from the government, Corporates, municipalities and bonds from other relevant institutions," says Emmanuel Mugiraneza, Public Relations Officer at Capital Markets Authority (CMA). The government has pledged to release quarterly bonds, a move observers say will trigger a saving and investing culture among Rwandans.
In February, an Rwf 12.5 billion bond was issued receiving a 140 percent surplus subscription. On May 20, 2014, the International Finance Corporation tested the appetite on the local market by issuing an Rwf 15.5 billion ($22 million) bond selling at rate of 12.5 percent per coupon. It was oversubscribed by 110 percent.
Rwanda's President Paul Kagame announced during the recent US-Africa Leaders Summit in Washington that the country will sell a $1 billion bond as its second international bond next year. Despite Rwandan bonds selling like hot potatoes, brokerage firms are demanding government incentives.
"There is less cash in the market, getting large investors requires some workout," says Isabella Ingabire of Africa Alliance, a brokerage firm. "We need extra incentives, not just the commission."
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